[yeti]

Anyone know how the price (PV) of the bond at issuance is calculated. I am aware that it is issued at a premium but can’t derrive the 1,081,105 from the facts.

[Anonymous]

I don't know which materials you are using so I can't see the facts, but a bond is issued with the following calculation:

[ FV * the PV of $1 for n periods and % rate ] + [ (FV*Interest rate) * PV of an ordinary annuity for n periods and % rate ]

The first part gives you the present value of the lump sum of the bond due at maturity and the second part gives you the present value of the interest payments due each period so the total bond issuance is the present value of all payments due for the bond. If you pay interest more than once a year be sure to multiply the years to maturity by the number of times you pay interest each year AND divide your % rate by the number of times you pay interest each year.

[Anonymous]

I don't know which materials you are using so I can't see the facts, but a bond is issued with the following calculation:

[ FV * the PV of $1 for n periods and % rate ] + [ (FV*Interest rate) * PV of an ordinary annuity for n periods and % rate ]

The first part gives you the present value of the lump sum of the bond due at maturity and the second part gives you the present value of the interest payments due each period so the total bond issuance is the present value of all payments due for the bond. If you pay interest more than once a year be sure to multiply the years to maturity by the number of times you pay interest each year AND divide your % rate by the number of times you pay interest each year.

[yeti]

My fault, I am using Becker 2014. Facts:

On Jan, 2, Y1, Lyndhurst Co. a privately held company issued 1mil 5 yr 10% bonds dated Jan 2, Y1.

Bonds provided semi-annual pmts to be made on June 30 and Dec 31 of each yr. Terms of the bond indenture allowed the company to call the bonds at 102 after 1 yr . Bonds were issued when the market interest rate was 8%.

-Use effective interest method for amortizing bond discount and premiums

-Bonds mature Dec 31 Y5

-Fiscal year end is Dec 31

-Company called bonds at 102 on June 30 Y2

(However, the problem solution shows the full 5 year amortization table and does not stop at June 30 year 2 when called).

-No PV table was provided in the simulation that I could see (do I need to use an excel function, and is that typical?)

[yeti]

My fault, I am using Becker 2014. Facts:

On Jan, 2, Y1, Lyndhurst Co. a privately held company issued 1mil 5 yr 10% bonds dated Jan 2, Y1.

Bonds provided semi-annual pmts to be made on June 30 and Dec 31 of each yr. Terms of the bond indenture allowed the company to call the bonds at 102 after 1 yr . Bonds were issued when the market interest rate was 8%.

-Use effective interest method for amortizing bond discount and premiums

-Bonds mature Dec 31 Y5

-Fiscal year end is Dec 31

-Company called bonds at 102 on June 30 Y2

(However, the problem solution shows the full 5 year amortization table and does not stop at June 30 year 2 when called).

-No PV table was provided in the simulation that I could see (do I need to use an excel function, and is that typical?)

[Anonymous]

The PV tables are usually on a separate tab like the authortative literature is. Don't use excel because it won't be available on the test.

[Anonymous]

The PV tables are usually on a separate tab like the authortative literature is. Don't use excel because it won't be available on the test.

[Anonymous]

Sorry–I actually don't know if they provide PV tables for Becker, but I would assume they do if you need them for the answer. In the WTB the PV tables are in a separate tab.

[Anonymous]

Sorry–I actually don't know if they provide PV tables for Becker, but I would assume they do if you need them for the answer. In the WTB the PV tables are in a separate tab.

[Ima_Audit_You]

I just checked it out. It looks like the information given on the first question of the sim also contains a “Resources” tab, which contains the PV tables. n=10 i=4%(semi-annual)

Hope this helps a bit

FAR 5/1 - 83
REG 7/7 - 79
AUD 11/20 - 85
BEC 8/27 - ALMOST THERE!!

3 for 3! Study high, get high grades!!

[Ima_Audit_You]

I just checked it out. It looks like the information given on the first question of the sim also contains a “Resources” tab, which contains the PV tables. n=10 i=4%(semi-annual)

Hope this helps a bit

FAR 5/1 - 83
REG 7/7 - 79
AUD 11/20 - 85
BEC 8/27 - ALMOST THERE!!

3 for 3! Study high, get high grades!!

[Author]

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